(Bloomberg) -- Vietnamese shares rose the most since mid-August, with analysts citing a meeting between FTSE Russell and the country’s market regulator as boosting optimism over a potential index upgrade in 2025.
The benchmark VN Index climbed 2.2% as of market close in Hanoi. That compares with a 0.1% rise in the MSCI Asia Pacific Index.
Vietnam has taken a series of steps to boost its chances of being reclassified as an emerging market by FTSE Russell, most recently removing a requirement for overseas investors to fully pre-fund equity trades. The change resolved a long-standing barrier that had prevented index compilers from upgrading the nation from its frontier status, which discouraged investments from large foreign funds.
“Vietnam’s market surged sharply on speculation that FTSE has expressed positive feedback regarding the country’s recent strides in regulatory reform,” said Tyler Manh Dung Nguyen, chief market strategist at Ho Chi Minh Securities JSC.
The country may draw $5 billion to $6 billion in capital inflows from passive and active funds if its stock market is upgraded to emerging market status, said Wanming Du, director of index policy at FTSE Russell. She was speaking at a Bloomberg Businessweek Vietnam summit in Ho Chi Minh City on Thursday.
FTSE Russell expects to evaluate Vietnam for a market upgrade in six to nine months, Du said. Vietnam’s regulation is now in place, “what we really wanted to look at was experience of international investors.”
“EM reclassification would be a key driver for flows,” JPMorgan Chase & Co. analyst Khoi Vu wrote in a note this month. The latest reform measures have increased the probability of FTSE upgrading Vietnam within the next 12 months, the analyst said.
Bloomberg Businessweek Vietnam is a partnership between Beacon Asia Media and Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.
--With assistance from John Cheng and Nguyen Dieu Tu Uyen.
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